MOST Analysis

Mission Statement

After vendor selection is done, a contract has to be signed to formalize the terms of the agreement. But before a contract is finalized, there is generally a process of contract negotiation where both parties discuss and smooth out all the details of the contract. It is important for parties involved in a contract to understand their rights as well as obligations. The expected services and the compensation against those services should be clearly defined. All stakeholders should be in agreement with the terms of the contract. Only when these and other conditions are satisfied, can a contract be considered successful. This is what contract negotiation ensures. Negotiation of the terms of a contract should take into account all of the above points as well as other basic aspects of the agreement. Some of these aspects would be the price, quality, services offered, delivery, terms of payment, support, and any other crucial issues. Apart from these core factors, there are some other points of negotiation as well which ensure that the contract will work smoothly on application. For instance, the contract needs to define the KPIs to be used for vendor performance monitoring and the reporting methods. It should define the communication methods, invoicing methods, and delivery practices, including any system integrations that may be required from the vendor. The contract should also lay out the terms for dispute resolution and clearly name the contacts on both sides for such purpose. Any training or skill transfer requirements must also be agreed upon before finalizing the contract. A final critical component is to anticipate a possible future amicable “divorce”. The contract should clearly specify ownership of data, intellectual capital developed, customer relationships, how data will be transferred to a new vendor, transitioning knowledge, etc., if either party terminates the contract.

---

Objectives

01. Prepare for Contract Negotiation: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
02. Set Negotiation Objectives: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
03. Negotiation Strategies: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
04. Request for Proposal (RFP): departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
05. Due Diligence Checklist: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
06. Check References: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
07. Exit Strategy: departmental SWOT analysis; strategy research & development. 1 Month
08. Mitigating Contract Risks: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
09. Contract Review & Next Steps: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month

---

Strategies

01. Prepare for Contract Negotiation: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
02. Set Negotiation Objectives: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
03. Negotiation Strategies: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
04. Request for Proposal (RFP): Each individual department head to undertake departmental SWOT analysis; strategy research & development.
05. Due Diligence Checklist: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
06. Check References: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
07. Exit Strategy: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
08. Mitigating Contract Risks: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
09. Contract Review & Next Steps: Each individual department head to undertake departmental SWOT analysis; strategy research & development.

---

Tasks

01. Create a task on your calendar, to be completed within the next month, to analyze Prepare for Contract Negotiation.
02. Create a task on your calendar, to be completed within the next month, to analyze Set Negotiation Objectives.
03. Create a task on your calendar, to be completed within the next month, to analyze Negotiation Strategies.
04. Create a task on your calendar, to be completed within the next month, to analyze Request for Proposal (RFP).
05. Create a task on your calendar, to be completed within the next month, to analyze Due Diligence Checklist.
06. Create a task on your calendar, to be completed within the next month, to analyze Check References.
07. Create a task on your calendar, to be completed within the next month, to analyze Exit Strategy.
08. Create a task on your calendar, to be completed within the next month, to analyze Mitigating Contract Risks.
09. Create a task on your calendar, to be completed within the next month, to analyze Contract Review & Next Steps.

---

Introduction

Running a successful business requires collaboration across many teams when negotiating contracts with vendors. However, many companies typically lack the skills necessary to bargain effectively with suppliers, which results in costs that could have been easily avoided. Because of this, every business owner needs to develop their negotiation skills.

There are a few things you should watch out for if you’re planning to connect up with vendors or have already established a supply chain network. These tips will enable you to manage your company more successfully and help you stay within your budget while buying goods and services.

The essentials of a fruitful vendor negotiation

These five essential strategies for creating a successful relationship with your vendors are likely well known to anyone with even a few years of procurement experience. There’s a good possibility that you already do at least some of these if you run a business. Let’s examine the ideal methods for negotiating vendor agreements.

Assess your position

Always consider whether the vendor meshes with your business and is consistent with your current objective. Mutual interest is the one factor that unites all partnerships. The likelihood of developing a lasting connection increases with the amount of shared interests you have. On the other hand, it is always preferable to leave if your ideals appear to be at odds.

The next step is to create a thoughtful list of the requirements you’re looking to fill. Consider carefully the obstacles the vendor will need to overcome, the services or costs you are willing to bargain for, and the issues you will not be willing to compromise on.

Here are some things to consider:

• The specifications you have for the goods you’re producing or buying

• Your financial situation

• The current sales targets of your organization

• Your objectives for the new collaboration

• Criteria for selecting a vendor

Negotiate with more than one vendor

Never enter vendor contract discussions without having a strong backup plan. This should be your guiding principle while negotiating supplier contracts. Additionally, you can always advocate for what’s best for you while exploring the options with more than one provider because you won’t have to worry about damaging a connection.

converse with several suppliers at once. Inquire about their costs, the method they use to transport their products, and other facets of their operation. Gather a lot of information to aid in weighing the competing offers from each provider. Comparing various bids ensures that you are not entering a negotiation without any market expertise.

Risks and liabilities

Risks and liabilities are another issue to watch out for during vendor contract discussions. You are most exposed if you are a business owner. You must therefore avoid taking a chance by clinging to any loose ends that can wind up costing you later.

To emphasize the obvious once more, there will always be dangers in business. Things that happen in business that you didn’t expect to happen frequently include vendors who falsify their financials, unexpected recessions, and global pandemics.

It’s usually advisable to establish boundaries for risks and responsibilities that are clearly specified in order to avoid being caught off guard. Recognize when you should renegotiate a contract or when you can afford to cut your losses and part ways with a vendor.

Mutually beneficial relationships

A lot of business owners are mistaken about this. Negotiating with a vendor effectively doesn’t include nickel and diming your source. Instead, it’s about creating a strong bond where you both support and uplift one another.

Think about the terms and conditions from the standpoint of your vendor. Where you can, take some liberties. Offer non-monetary clauses in the contract, such as scheduling flexibility, that can make the vendor’s life simpler.

Since your vendor is an authority in their field with a wealth of knowledge you can use, the objective is to establish a solid collaboration with them. And business partners who like you might go above and above to assist you when you need it.

Communication process

When considering how to bargain with suppliers, start by improving your communication. Any successful trade depends heavily on communication, and poor communication can lead to losses. Always strive to keep lines of communication open. When discussing the contract, be succinct, precise, and on time.

When working on challenging challenges, personal communication is more productive than virtual contact, and this is also true when hiring vendors. Instead of dealing with juniors or associates, try to deal directly with department heads and executives.

Additionally, confirm that the party you’re negotiating with has the power necessary to decide. You shouldn’t waste time talking to someone who needs to go through their organization’s hierarchy in order to answer your question with a solid yes or no.

---

How redlining and negotiating are made simple by digital contracts

In the past, parties involved sat down at a table and worked on a contract for days. When email first appeared, businesses moved there to conduct contract negotiations.

But business has changed much since then, with the exception of contract drafting. So many individuals waste hours each day writing documents in Microsoft Word and exchanging emails. The method is labor-intensive and wasteful, costing the business time and resources.

However, digital contracting is now the only thing that matters, especially when it comes to digital services like contract negotiations with IT vendors.

Here are just a few of the things that digital contracting can help with:

• Real-time status tracking

• Retrieve comments on particular segments

• Specific time-stamped draft copies

• Directly notifying users of any changes, so that they can offer input.

Nobody else can automate a process like you can with the Ironclad. Sharing access to the main contract document with your coworkers and counterparties is the only necessary step. Any modifications made after that point will be fully transparent to everyone, and each clause will need to be approved by each accountable party. It is straightforward and easy to collaborate on contracts when everyone is informed.

How using digital contracts can help you keep good vendor connections

Consider it in this manner. A team is working on a contract that calls for the vendor to deliver goods worth $5 million per month. Both sides’ legal staff will exercise extreme caution to make sure everything looks fine.

Every concerned department, save Legal, must voice its opinion. Every aspect of the day-to-day operations, including Finance, Product Management, and Accounts, has a voice in the decision.

Imagine conducting the entire discussion by email, with each party delivering a unique soft copy that has undergone a variety of modifications. Nobody is collaborating on the same document if there is a day’s wait. The logistics are a mess.

Fortunately, a platform has been developed where a contract management system can handle each of these in one location in real time. Teams from both companies can collaborate and work concurrently on the same document.

Source: Dock365

Anyone can ask for another user’s input and directly tag them, and all of these actions will be fully traceable. All teams concerned may see and understand the redlining in its entirety. This is the reason contract management software has taken the role of emails.

Digital contracting streamlines and greatly improves the vendor negotiation process, or any time you’re negotiating contracts with suppliers, as opposed to the past, when creating a contract could take weeks or even months. You don’t need to spend all day looking through paper trails and write three emails to make a few changes.

This maintains a good rapport between you and your vendor. The redlining procedure becomes less stressful, the negotiation as a whole becomes less hostile, and mutually advantageous terms are reached.

---

When entering into a vendor contract, take into account these 5 factors

Contract termination clauses are a topic I get asked about a lot. Unfortunately, depending on how much consideration was given to the termination wording when the contract was being created, your alternatives may be restricted if you decide you “want out” while in the middle of an existing arrangement. Let’s examine the kind of factors you should take into account before signing a contract.

The 5 Vendor Contract Items to Consider

If you’ve been following our information for the past year or two, you are aware of my frequent assertion that entering into a new contract while hoping to get out is difficult.

However, I frequently compare it to the safety briefing you receive on a flight because, although the likelihood that you will need to employ the safety measures is quite remote, it is still crucial to be aware of them. You must be able to leave right away if necessary.

When thinking about a contract, the same holds true

1. Make sure that both your institution and the third party have a solid understanding of what each other’s responsibilities are from a contractual standpoint. Include termination steps and what happens to your confidential information after the contract ends. Don’t just accept the off-the-shelf, or “we have everyone sign this” contract.

2. Define carefully what the notification period will be if you choose not to renew the contract.

3. Define what steps may be in order if you need to quickly exit the contract. A couple of common example situations are in the case of some sort of contractual breach by the third party, such as a failure to live up to the standards in the contract, or an imminent financial failure of the third party.

4. A well-written and negotiated contract is a “win/win” for both parties with mutual responsibilities and protections. Neither party should feel trapped by the contract. At the same time, if things go poorly or if you simply don’t want to renew, you should have clearly articulated the steps that need to be taken, in what order they should occur, the appropriate time frames established and the costs associated (if any) with terminating the agreement.

5. Get a contract expert (e.g., attorney, paralegal, expert contract administrator, whomever you can call upon) to review all elements of the contract to make sure that it is accurate and enforceable.

By carefully drafting agreements that protect you and your vendor from both a legal and business perspective, contract management done right may be a significant benefit to your organization.

---